IDC: The Business Value of Connected Mainframe for Digital

The Business Value of the Connected Mainframe for Digital Transformation

Sponsored by CA Technologies and IBM | * October 2018

IDC White Paper

* This paper was originally published in December 2016, with no substantial update to the business value data

Document #US420639_2018 © 2018 IDC. www.idc.com | Page 2

IDC White Paper | The Business Value of the Connected Mainframe for Digital Transformation

CONTENTS

Executive Summary 3

Study Demographics 5

The Connected Mainframe 5

• Modernization 6

• Integration 7

Business Value Summary 9

• Business Productivity Benefits 10

• Cost of Operations Efficiencies 12

• IT Infrastructure Cost Reductions 12

• IT Staff Productivity Benefits 13

ROI Analysis 13

Investing in the Mainframe Rather than Migrating 14

Challenges/Opportunities 16

Conclusion and IDC’s Recommendations 16

Appendix 17

• Demographics and Mainframe Environments of Interviewed Organizations 17

• Methodology 18

• Additional Customer Quotes 20




EXECUTIVE SUMMARY

After several years of relentless hardware and software innovation, the mainframe is at an

inflection point from being a supporting platform of transaction revenue to becoming a

source of revenue growth and innovation. Organizations are evolving toward what IDC calls

the “connected mainframe.” The platform is transforming from a revenue-supporting machine

into a revenue-generating machine and is increasingly playing a central role in organizations’

digital transformation (DX) journey. Key steps in achieving the connected mainframe require

organizations to modernize and integrate the platform with their internal and external

environments. IDC finds that these modernization and integration initiatives lead to new

business innovations, which in turn are driving revenue growth and improving organizational

operational efficiency.


Sponsored by: CA Technologies and IBM

Authors: Peter Rutten Matthew Marden

* October, 2018

Business Value Highlights300%+ five-year ROI

10 months to breakeven

An average of almost

$200 million in additional revenue per year

27% lower mainframe licensing costs

52% more efficient mainframe management

47% lower overall cost of operations over five years than distributed environments

According to IDC’s research, connected mainframe adopters are generating an average of almost $200 million in additional revenue per year while improving business and IT staff productivity and cutting operational costs. Over 50% of the benefit value came from business productivity gains, realized from higher transaction volumes, new services, and/or business expansion. Furthermore, these organizations would experience 47% lower cost of operations over five years than if they had migrated off the mainframe to a distributed infrastructure.

Adopters of a connected mainframe strategy can achieve more than 300% return on investment (ROI) over five years in their quest for digital transformation.



Value Generation from the Connected MainframeA healthcare provider noted: “Our membership in one line of business has gone from about 250,000 members to about 800,000 members because of the technological enhancements we’ve done to modernize on the mainframe.”

IDC’s findings are based on extensive interviews with executives at nine organizations

that have historically run significant mainframe operations. The goal of this study was to

understand how and to what extent these organizations are leveraging the platform to

support their DX initiatives and share those best practices so that other IT leaders can make

informed business decisions as they evaluate their mainframe plans and strategies.

This study reveals key attributes and examines how faster versus slower adopters accrue the

benefits at much different rates. The research also looks at how organizational and cultural

stances toward the mainframe platform impacted the speed at which organizations made

progress on their digital transformation efforts. In summary, we found the following:

1. Organizations with a business-first approach accrued much greater value

generation. By business first versus platform first, we mean organizations that are

committed to finding the fit-for-purpose platform to fulfill business objectives first and as

such are evolving IT as a coherent team that utilizes infrastructure resources in the most

optimized way.

2. Companies that look to extend the mainframe see much larger business value

benefits versus organizations that are looking to migrate or starting afresh. Many

participants noted that reusing mainframe assets to deliver new services was easy and

cost effective. Conversely, at least one organization that attempted migration reported

experiencing buyers’ remorse.

3. Participants that had a higher cultural acceptance of the mainframe as an integral

part of a connected ecosystem also returned greater benefits. Most participants

considered the ability to integrate the mainframe with other components of the

datacenter as a mantle of IT agility and as a competitive differentiator.

4. There is a growing realization that innovation on mainframe is actually feasible.

Study participants realized that the capabilities have matured significantly and are seeing

results by adopting just a few capabilities such as Java, internal APIs, or Linux. As a result,

the participants are realizing that they can deliver innovation at a pace comparable to the

rest of the IT organization.

That said, even with the compelling economic benefits, the biggest reason for slow adoption

of the connected mainframe is inertia. Cultural notions about the platform have been slow

to change. Many of the participants expressed frustration with outdated perceptions in the

organization that are not considering future potential. IDC believes that the mainframe has a

central role in digital transformation; businesses that do not take advantage of its broad range

of capabilities are giving up value and, potentially, competitive advantage.



Study DemographicsIDC interviewed nine organizations with significant mainframe operations to inform this

study’s analysis as well as three additional organizations that provided qualitative feedback.

These enterprises were of various sizes and included multinational organizations in the

financial services, insurance, and healthcare sectors. These organizations rely on their

mainframe platforms to run their most critical internal and customer-facing operations

that generate billions of dollars of revenue each year. For specific information about these

organizations’ mainframe environments, see the Appendix.

Situation OverviewThe Connected Mainframe

This IDC study has determined that organizations with mainframes that are pursuing what

IDC has labeled a “connected mainframe” strategy are engaged in two broad sets of initiatives

— modernization and integration with the mainframe — that drive business innovation.

Figure 1 shows varying degrees of adoption of a variety of technologies and practices within

the connected mainframe strategy.

FIGURE 1

Connected Mainframe Adoption Among Study Participants

Note: The adoption categories are adapted from Everett M. Rogers’ Diffusion of Innovation. Source: IDC, 2016

• Modernization Initiatives

• Integration Initiatives

Innovators Early Adopters Early Majority Late Majority Laggards

Mobile AppsDevOps & Agile

Mainframe-as-a-service

Hybrid Cloud Linux on Mainframe

Web Enablement

API Usage

Running Java on Mainframe



Modernization Modernizing on the mainframe means creating a platform that is integration ready within the datacenter and with the outside world and subsequent business innovation.

RUNNING JAVA ON THE MAINFRAME

An important aspect of modernizing on the mainframe is the use of Java, which most

organizations in the study say they support — some aggressively with Java on Linux, while

others in a limited fashion running Java inside Customer Information Control System (CICS).

WEB ENABLEMENT

A second component of modernization is enabling the mainframe to communicate with

other parts of the infrastructure using web services and service-oriented architectures

(SOAs) to deliver new revenue-generating services. Web services can deliver the trove of

data and functionalities within the mainframe to other applications seamlessly and securely

while leveraging the platform’s inherent reliability and scalability. “We have 600 or 700

mainframe-based services in production right now.”

LINUX ON THE MAINFRAME

The primary factor driving Linux on mainframe is cost. One participant said that it moved

departmental workloads to Linux both in the distributed and the mainframe environments

because of the cost advantages. Another participant stated: “We used to MQ service loads

on distributed [environments]; now we are moving that to Linux on the mainframe.” In

addition, by integrating Linux workloads using the mainframe’s fast internal communications,

organizations can:

» Colocate systems of record on z/OS with systems of engagement on Linux, allowing

seamless extension of core business systems rather than proliferating data to other servers

» Protect more workloads inside the mainframe and keep interacting applications closer

together for analytics

However, confusion about pricing is slowing adoption; Linux processors are actually cheaper,

but there is disagreement whether Linux should remain on the distributed side. More market

awareness about the benefits of Integrated Facility for Linux (IFL) will help organizations build

the case.

Adoption: Late majority

Benefits: Ease of integration - Increased capacity and computational volume, skill management

Adoption: Early majority

Benefits: Deliver new revenue-generating services quickly

Adoption: Early adopter

Benefits: Lower infrastructure cost, greater operational efficiency



MAINFRAME AS A SERVICE

The next aspect of modernization on the mainframe is around cloud computing, which

typically consists of on-demand self-service, broad network access, resource pooling, rapid

elasticity (ideally automatically), and measured services, meaning pay per use. The mainframe

delivers increasingly on these cloud aspects. For example, infrastructure as a service (IaaS)

can be achieved with z/VM and Linux on IBM Z; platform as a service (PaaS) and software as a

service (SaaS) can be delivered with middleware and z/OS. One study participant stated: “We

use the mainframe for DB as a service, file as a service, and MQ as a service.” However, most

businesses are in the very early stages, given that self-service, billing, and tooling are expected

in forthcoming versions of z/OS.

Integration Integration with the mainframe means connecting the mainframe with the rest of the datacenter infrastructure and IT processes as well as opening the platform up to the outside world.

MOBILE APPS WITH THE MAINFRAME

Exposing services and capabilities on the mainframe to mobile apps is the most common

among the study participants, given the cost advantages and the ability to simply extend and

connect and reuse mainframe applications:

» “When you look at all the mobile capabilities, you could make a case; why go to the distributed

environment when you can run this on the mainframe right now — because you can do it

cheaper and faster. The z13s are opening up a whole new world for us.”

» “Mobile apps run on the mobile and connect to the ‘old’ service capabilities [on the mainframe]

for payment and such. You don’t have to rebuild payment to connect to a mobile app.”

» A healthcare organization noted that it is moving to the next step with IoT and Big Data

as follows: “We have partnered with vendors around remote devices, diabetes devices. We’re

positioning for IoT and Big Data that are tied to our mainframe development.”

LEVERAGING INTERNAL AND EXTERNAL APIS

A second aspect of integration is the use of internal and external APIs on the mainframe, which

is widespread among the participating organizations. For mobile enablement, the use of API

is standard. A participating organization stated: “We are participating in business ecosystems,

and the best way to interact with different parties in ecosystems is through APIs. [These ecosystems]

provide revenue now. We expect revenue-generating opportunities from public APIs to grow.”


Benefits: Accelerated innovation


Benefits: Faster time to value with reuse of existing capabilities

Adoption: Innovators

Benefits: Improved cost predictability with pay as you go



DEVOPS AND AGILE ON THE MAINFRAME

The goal of DevOps is to release applications faster and more frequently. In fact, the

mainframe supports many tools identical to those for other platforms for every stage of

the application life cycle:

» “We routinely run both agile projects and scaled agile projects, and if there’s a mainframe

component, it certainly participates.”

» “All our services on the mainframe are versioned so that we can bring in a new service

version without any impact.”

» A major European bank stated: “... with this more agile approach and also all this flexibility,

you can call all the services from a web browser. This opens up completely new fields.”

HYBRID CLOUD AND MODERN APPLICATION DEVELOPMENT

Last, IDC noted that it is still very early days for hybrid cloud and modern app

development in spite of the inherent platform advantages and tool maturity:

» Security is the barrier with hybrid cloud. On the one hand, mainframe “was the cloud

in a box” — highly suitable for hybrid cloud–like deployment where enterprises must

maintain a secure on-premise cloud for back–end systems of record and core data

but then connect with systems of engagement. That said, data privacy and security

concerns are holding organizations back, and the most IDC sees is private cloud

deployments with the mainframe.

» Adoption of modern app development using open source runtime frameworks,

microservices, and popular languages should be a best practice for a connected

mainframe but is still nascent. A few organizations are starting to adopt Eclipse-based

IDEs for “developers, who don’t even know that the mainframe is there,” but many

continue to develop on COBOL citing skills and culture.

Adoption: Early adopter

Benefits: Business and IT agility

Adoption: Innovator

Benefits: Augment computational capacity at lower cost, skill management



Business Value SummaryStudy participants reported significant impacts on business results while gaining

operational efficiencies with their connected mainframe initiatives. While specific use

cases and benefits differed by participant, they drew a common link between increased

mainframe agility and performance to improved business results. Meanwhile, almost

all organizations are realizing value in the form of reduced costs and more efficient

operations.

IDC’s analysis puts the annual value for study participants of these connected

mainframe initiatives at an average of $181,900 per application ($56 million per

organization) per year over five years. This value is accrued to the following three key

areas (see Figure 2):

» Business productivity benefits. By supporting business expansion, higher

transaction volumes, and new services, these organizations will capture additional

revenue of $646,500 per application ($198.5 million per organization) per year over

five years, which is recognized in IDC’s model with a 15% assumed operating margin

worth an average of $97,000 per application ($30 million per organization) per year

over five years. Higher revenue is being achieved by both better meeting business

demand through more effective delivery of applications and services and providing

a cost-effective platform for expanding business operations.

» IT staff productivity benefits. Requiring less IT staff time for day-to-day mainframe

support activities and enabling application developers to be more effective and

efficient translate into productivity benefits and time efficiencies worth an average

of $58,900 per application ($18 million per organization) per year over five years.

» IT infrastructure cost reductions. IDC projects that by reducing licensing and

power costs, interviewed organizations will achieve cost savings at an average of

$26,000 per application ($8 million per organization) per year over five years.

Organizations could run workloads on their connected mainframes at an average of

47% lower cost over five years than by moving to a more distributed environment they

have considered (refer to Figure 4).

IDC’s analysis puts the annual value for study participants of these connected mainframe initiatives at an average of $181,900 per application ($56 million per organization) per year over five years.



Business Productivity Benefits

Business productivity benefits ultimately come down to revenue generation and competitive

advantage. The mainframe is now poised to serve as a platform that supports business expansion

and forays into new types of services. Business growth is increasingly predicated on delivering

services to new user interfaces — especially mobile — and leveraging huge amounts of data

without impacting performance. In addition, time to delivery is becoming an increasingly important

competitive differentiator.

One organization explained: “Our investment in hardware and software will help to reduce the costs, but

in the end, it’s smart and clever business application that provides the value to the business. And when you

have a set of good processes that helps to deliver fast, then it’s even a bigger value-add for the business.”

Additional examples of mainframe innovation paying off through additional revenue are as follows:

» Supporting business growth and new types of services. “The new environment, the

modernization, [and] the new applications [on the mainframe] have contributed to the firm’s overall

revenue. Also, the scalability of the platform really helps — for example, we introduced new ebanking,

and we’ve had growth of four times more traffic without any cost impact.”

» API-enabled growth. “The business is well aware of the fact that there is a competitive advantage in

having the ability to build a hybrid platform with our mainframe. It means our ability to stitch together

a hybrid business platform is based on an API’s entry architecture.”

“By breaking up fixed deployment windows, a lot of features are much quicker to production, and people can use it. Now, we need about one to two weeks to build for a new service, a new capability.”

FIGURE 2

Average Annual Benefits per Application

($ p

er a

pplic

atio

n)

200,00180,00

160,000140,000120,000100,000

80,00060,00040,00020,000

0IT staff

productivity benefitsBusiness productivity

benefits

Average annual benefits per 100 users: $181,900

IT infrastructure cost reductions

$97,000

$26,000

$58,900

Source: IDC, 2016



Organizations that have adopted new approaches and tools to enhance their mainframe

development efforts delivered more value through increased business agility and faster time to

market. They are using APIs to integrate their mainframe and other IT environments, leveraging tools

for efficiencies, and adopting new languages. These approaches discussed in the The Connected

Mainframe section have dissolved barriers to development efficacy and spurred more vibrant

development ecosystems:

» Improved developer productivity: The interviewed organizations’ mainframe developers —

who number in the hundreds on average — have become 15% more productive on average

(value is attributed to the “IT staff productivity benefits” category in Figure 2).

» Shortened application development life cycles: Speeding up mainframe application

development life cycles benefits both internal users and end customers. “By breaking up fixed

deployment windows, a lot of features are much quicker to production, and people can use it. Now, we

need about one to two weeks to build for a new service, a new capability.”

These organizations are supporting services that generate revenue into the billions of dollars, but as

a result of their connected mainframe initiatives, the organizations are reporting a significant revenue

increase of an average of almost $200 million per year (see Table 1).

Business Impact With Connected Mainframe Initiatives Per Organization Per Application

Revenue Impact

Additional average revenue per year ~$200 million $646,500

Assumed operating margin 15% 15%

Revenue recognized for study results $30 million $97,000 (higher operating margin per year)

TABLE 1

Note: This table measures the average impact on study participants from their unique connected

mainframe initiatives (i.e., from a before-and-after perspective).

Source: IDC, 2016



Cost of Operations Efficiencies

In addition to supporting business growth, interviewed organizations are extending their

mainframe use cost effectively in terms of licensing, operational expenses such as power, and staff

management time cost. A participant that has made a substantial investment in modernization

and integration noted: “Our mainframe TCO has gone down by half in the last eight years, even as

transaction volumes doubled.” These operational efficiencies are found through improvements in

both IT infrastructure cost reductions and IT staff productivity (see Figure 3).

IT Infrastructure Cost Reductions

New mainframe hardware such as the z13 as well as mainframe software and tools enable

efficiencies in terms of both software licensing use and power consumption. These efficiencies

are of particular importance as organizations continue to make greater use of their mainframes.

Several organizations reported reducing mainframe licensing costs even as they grew their

transaction volumes, with one participant noting: “[O]ur licensing costs have gone down with

the use of specialty engines and the efficiencies of new mainframes — at least [by] 10%.” One

organization said: “We’ve reduced our setup by two machines by making consumption more efficient,

which will reduce power and cooling costs.”

“We’ve reduced our setup by two machines by making consumption more efficient, which will reduce power and cooling costs.”

FIGURE 3

Annual Costs of Operations With Connected Mainframe

Note: This figure measures the average impact on study participants from their unique connected mainframe initiatives

(i.e., from a before-and-after perspective, with licensing costs reflecting ongoing hardware and software licensing costs).

Source: IDC, 2016

Staff time and managementOpex costs (power and facilities)Licensing costs

35% lower

$92,200$67,200

$7,200

$52,500

$6,100$25,400

Before connected mainframe With connected mainframe

($ p

er a

pplic

atio

n)

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

Total: $151,800

Total: $98,700



IT Staff Productivity Benefits

IT teams responsible for administering their organizations’ mainframe environments have

benefited from hardware upgrades and new software. As a result, less staff support time is

required on a per-mainframe or a per-application basis. More importantly, these efficiencies can

free up staff time to work on higher-value initiatives such as the deployment of new services.

Examples include:

» Automation: “Our mainframe is growing in that we have more legal entities on the same

machines, but we’ve still been able to reduce staff resources for operating the whole system because

there is a lot of automation, and it is really standardized.”

» Efficient growth: “[I]t seems to be really hard to get a good financial business case [to migrate]

because the target environments sometimes come out to be very complex and costly to manage,

just from a people’s standpoint, let alone a technology where on the mainframe we can grow that

technology by leaps and bounds and really add no people.”

ROI AnalysisIDC used the following three-step method for conducting the ROI analysis:

1. Gathered quantitative benefit information during the interviews using a before-and-

after assessment of the impact of modernization and integration initiatives. The benefits

included staff time savings and productivity benefits, increased revenue, and IT-related

infrastructure cost reductions.

2. Created a complete investment (five-year total cost analysis) profile based on the

interviews. Investments include costs related to new mainframe hardware and tools, along

with associated ongoing maintenance costs.

3. Calculated the ROI and payback period. IDC conducted a depreciated cash flow analysis of

the benefits and investments related to the organizations’ mainframe platforms over a five-

year period. ROI is the ratio of the net present value (NPV) and the discounted investment. The

payback period is the point at which cumulative benefits equal the initial investment.

IDC’s results of the benefits and costs of interviewed organizations investing in a connected

mainframe present a compelling summary of the value these organizations are achieving (see

Table 2).

“Our mainframe is growing in that we have more legal entities on the same machines, but we’ve still been able to reduce staff resources for operating the whole system because there is a lot of automation, and it is really standardized.”



Investing in the Mainframe Rather than MigratingDespite the tangible benefits for organizations of investing in and modernizing their mainframe

platform, as can be expected, organizations do reassess the value of their mainframe platforms

and consider using more distributed infrastructure. However, this study as well as multiple

organizations’ internal analyses have demonstrated that remaining on and investing in their

mainframe platform is more cost effective and delivers greater business value than migrating to

more distributed architectures.

The granularity with which software licensing costs can be attributed to lines of business can

itself lead to cost analyses of potential migrations. One organization explained: “The irony is that it’s

exactly the ease with which the costs of running workloads on mainframes can be determined that leads

to questions about its cost and value.” Nevertheless, interviewed organizations consistently reported

struggling to find a business case for moving workloads off of the mainframe. In fact, the potential

licensing savings from moving to a more distributed infrastructure platform were more than

counteracted by cost and staff inefficiencies in building out a substantial distributed environment,

without even taking into account factors such as the staff effort of migrating workloads and

increased operational risk. The following challenges were noted:

» Prolonged and expensive migrations: “The majority of potential big migrations we’ve looked at

end up with the transition costs being very high without a great business case or an ROI.”

» Significant investment in hardware: “To do the mainframe applications on distributed servers,

we’d need another 5,000 servers in addition to what we have now.”

“The irony is that it’s exactly the ease with which the costs of running workloads on mainframes can be determined that leads to questions about its cost and value.”

Source: IDC, 2016

Five-Year ROI Analysis Per Organization Per Application

Benefit (discounted) $201 million $655,800

Investment (discounted) $46 million $148,500

Net present value (NPV) $155 million $507,300

Return on investment (ROI) 300%+ 300%+

Payback period 10 months 10 months

Discount rate 12% 12%

TABLE 2



» IT staff requirements: “We would probably need two times as many staff for managing a

distributed environment. It’s a lot of effort, and it creates a lot more breakage because there’s a

lot more moving parts.”

One study participant that moved to distributed infrastructure described “buyers’ remorse

for some of the application pieces,” especially because of the significant additional staff time

costs involved with managing and patching a significantly larger distributed environment.

Organizations that made the cost-effective choice to remain on their mainframe platforms

are realizing five-year cost of operations that are 47% lower on average, taking into account

hardware, maintenance, licensing, power, facilities, IT staff management time, operational

impact from system and application downtime, and staff time costs for migration (see

Figure 4).

FIGURE 4

Five-Year Cost of Operations per Application

CapexLicensingOpexIT staff, managementUnplanned downtime, impactMigration staff time costs

$1,272,800

47% less$261,100

$336,200

$156,700

$134,000

$100,600

$173,400

$67,000

$336,300

$127,000$244,700 $15,000

Distributed environment Connected mainframe

($ p

er a

pplic

atio

n)

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0

Notes: This figure compares the five-year average cost of operations for study participants versus the average cost of operations for a more distributed environment based on their experiences and

analyses. See the Methodology for assumptions.

Source: IDC, 2016

Distributed Connected environment mainframe Difference % Difference

Capex $156,700 $134,000 $22,700 14

Licensing $261,100 $336,200 -$75,100 -29

Opex $173,400 $67,000 $106,400 61

IT staff, management $336,300 $127,000 $209,300 62

Unplanned downtime, impact $100,600 $15,000 $85,600 85

Migration staff time costs $244,700 $– $244,700 100

Total $1,272,800 $679,200 $593,600 47

$679,200



One participant stated: “At the end of the day, our mainframe platform is very highly capable, so it’s

[about] looking at how can we leverage that capability and the manageability because we’re much

more efficiently managing the amount of resources we have on the mainframe than we do on the

distributed environment.”

Challenges/OpportunitiesThe dramatic regeneration of the mainframe has led to a complex mix of technological and

cultural dilemmas that businesses are still trying to sort out. Businesses that see mainframe as an

integral part of their entire infrastructure are well ahead, if they have executive support for their

vision. The business executives who would like to achieve the same, but are fighting a cultural war

with their colleagues on the distributed side or with executives who have an outdated opinion of

the mainframe as “legacy” or who relegate the mainframe to the trusted purposes it was built for

decades ago, will have a difficult time realizing the vision of the connected mainframe.

The greatest challenge for businesses with mainframes is justifying their future vision for the

platform in terms of costs and benefits, disentangling not only the years of value that the

mainframe has delivered but also the business benefits that new innovations can provide. IDC

believes that this is a tall order. What can be said, and this is where the opportunity lies, is that

businesses that embrace modernization, integration, and business innovation on the mainframe

have reported not only new revenue and reduced cost, as this study shows, but also a more

coherent future vision for how the business will benefit from a connected ecosystem.

Conclusion and IDC’s RecommendationsIDC finds that organizations can and do successfully drive DX with their mainframe and achieve

a compelling ROI. Adopters of connected mainframe strategy invested an average of $46 million

in new mainframe hardware, software, and tools to realize five-year discounted benefits of $201

million per organization and a five-year ROI of more than 300% with an average breakeven period

of 10 months. In addition, a few participants that considered or attempted migrations off the

platform ended up paying higher costs or even regretting their decision.

For the nine participants, the mainframe is an integral part of their hybrid IT environment. They

are demonstrating that the question is not whether or not the mainframe is part of the future

of IT, it is really about the fit-for-purpose of platforms. The mainframe excels at certain tasks, and

given proper transformation, organizations can realize the full potential the mainframe can offer.

Today, all nine participants are forging ahead in making the mainframe a highly efficient, revenue-

generating part of an open IT ecosystem.

At the end of the day, our mainframe platform is very highly capable, so it’s [about] looking at how can we leverage that capability and the manageability because we’re much more efficiently managing the amount of resources we have on the mainframe than we do on the distributed environment.”



IDC believes that for organizations looking to pursue a connected mainframe strategy, the technical,

business, risk, and cultural aspects must work in concert:

» The initiatives categorized as “modernization” and “integration” in this white paper and industry

adoption can serve as a guideline for the mainframe evolution.

» The organizations should foster knowledge sharing across their IT organization beyond the core

mainframe team.

» The organizations should focus their teams on the business outcome to gain stakeholder buy-in.

No platform in today’s datacenter represents the “secret sauce” for digital transformation. Rather,

each platform has its own role to play. IT’s task is to maximize the business impact of the entire

infrastructure, with disregard for old-fashioned cultural differences.

In conclusion, we believe that the time to pursue a connected mainframe strategy is now.

Businesses can tap into a broad range of new capabilities to potentially earn a strong return on

investment and competitive advantage.

AppendixDemographics and Mainframe Environments of Interviewed Organizations

The demographics of the interviewed organizations are highlighted in Table 3.

n = 9

Source: IDC, 2016

Firmographics of Interviewed Organizations Average Median

Number of employees 91,225 31,250

Number of IT staff 8,321 1,850

Number of IT users 89,444 31,250

Total number of business applications 3,595 1,400

Revenue per year $27.6 billion $11.4 billion

Countries United States, Germany, and Switzerland

TABLE 3



Table 4 reflects the scale of interviewed organizations’ mainframe environments and operations. On

average, the organizations have 14 mainframes running more than 300 business applications. All

interviewed organizations use their mainframes for significant transactional and batch operations

and are increasingly leveraging their mainframes to support web, mobile, analytics, and user-facing

workloads.

MethodologyIDC’s standard ROI methodology was utilized for this project. This methodology is based on

gathering data from organizations maintaining significant mainframe operations as the foundation

for the model. Based on interviews, conducted in 2016, with nine organizations that are running

important workloads on the mainframe, IDC performs a three-step process to calculate the ROI and

payback period:

» Measure the savings from reduced IT costs (staff, hardware, software, maintenance, and IT

support) and business impact (revenue) over the term of the investment compared.

» Ascertain the investment made in initiatives intended to modernize their mainframe platforms.

» Project the costs and savings over a five-year period and calculate the ROI and payback for the

investment in their mainframe platforms.

IDC bases the payback period and ROI calculations on a number of assumptions, which are

summarized as follows:

» Time values are multiplied by burdened salary (salary + 28% for benefits and overhead) to

quantify efficiency and manager productivity savings.

n=9

Source: IDC, 2016

Mainframe Environments of Interviewed Organizations Average Median

Number of mainframes 14 7

Number of terabytes 2,095 873

Number of applications 307 250

Number of MIPS 136,500 70,000

Utilization rate 73% 82%

TABLE 4



» Downtime values are a product of the number of hours of downtime multiplied by the

number of users affected.

» The impact of unplanned downtime is quantified in terms of impaired end-user

productivity and lost revenue.

» Lost productivity is a product of downtime multiplied by burdened salary.

» The net present value of the five-year savings is calculated by subtracting the amount that

would have been realized by investing the original sum in an instrument yielding a 12%

return to allow for the missed opportunity cost. This accounts for both the assumed cost

of money and the assumed rate of return.

Because every hour of downtime does not equate to a lost hour of productivity or revenue

generation, IDC attributes only a fraction of the result to savings. As part of our assessment,

we asked each company what fraction of downtime hours to use in calculating productivity

savings and the reduction in lost revenue. IDC then taxes the revenue at that rate.

IDC’s analysis of the benefits and costs associated with interviewed organizations’ connected

mainframe initiatives, which informs the results shown in Figures 1 and 2 and Tables 2 and 3,

includes the following:

» Investment costs in connected mainframe initiatives include incremental costs, including

the cost of new mainframe hardware and associated software and tools, and annual

maintenance fees.

» Benefits from connected mainframe initiatives include higher revenue (which is

recognized for the purposes of IDC’s model with a 15% operating margin assumption),

higher IT infrastructure and application developer productivity, and cost savings related to

mainframe licensing and power consumption.

IDC’s analysis of the benefits and costs associated with interviewed organizations’ use of

connected mainframe platforms instead of more distributed alternatives, which informs the

results shown in Figure 3, includes the following:

» Mainframe costs include the total cost of mainframe hardware with a five-year assumed

life cycle, annual maintenance fees for the fourth and fifth years, annual licensing

costs, power and facilities costs, IT staff time to manage and support the mainframe

environment, and the cost of unplanned outages in terms of lost employee productivity

and lost revenue.



» More distributed infrastructure costs include the total cost of more distributed server

hardware with a five-year assumed life cycle, annual maintenance fees, licensing costs,

power and facilities costs, IT staff time to manage and support the more distributed

environment, the cost of unplanned outages in terms of lost employee productivity and

lost revenue, and the staff time cost involved with potentially migrating applications to a

more distributed environment.

Note: All numbers in this document may not be exact due to rounding.

Additional Customer Quotes» “Reaching new customers is the benefit that the business gets from all the new things that we’re

trying on the mainframe.”

» “We introduced new ebanking and we had growth of four times more traffic without any cost

impact (...). The new environment, the modernization, the new applications [on the mainframe]

have contributed to the firm’s overall revenue.”

» “The mainframe is core to our strategy for developing our core applications. We believe that

it will continue to be where we develop or extend any of our core applications to support our

business.”

» “From a pure business perspective, our mainframe is generating a lot more revenue than it used

to. We just completed an acquisition, and their mainframe platform is coming over to us and

be[ing] a huge revenue generator with those applications on the mainframe.”

» “The mainframe is still the most cost-effective platform we have both in terms of overall

reliability as well as the expense to run it.”

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About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence,

advisory services, and events for the information technology, telecommunications and consumer

technology markets. IDC helps IT professionals, business executives, and the investment

community make fact-based decisions on technology purchases and business strategy. More

than 1,100 IDC analysts provide global, regional, and local expertise on technology and industry

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Documents

IDC: The Business Value of Connected Mainframe for Digital